Emergent Research

EMERGENT RESEARCH is focused on better understanding the small business sector of the US and global economy.

Authors

The authors are Steve King and Carolyn Ockels. Steve and Carolyn are partners at Emergent Research and Senior Fellows at the Society for New Communications Research. Carolyn is leading the coworking study and Steve is a member of the project team.

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Disclosure Policy

Emergent Research works with corporate, government and non-profit clients. When we reference organizations that have provided us funding in the last year we will note it.
If we mention a product or service that we received for free or other considerations, we will note it.

November 2017

November 30, 2017

"... presents a detailed analysis of changes in the digital content of 545 occupations covering 90 percent of the U.S. workforce in all industries since 2001. The analysis categorizes U.S. occupations into jobs that require high, medium or low digital skills and tracks the impacts of rapid change."

The study findings show the U.S. economy is digitializing rapidly.

As the report chart below shows (click to enlarge), the number of high digital jobs has grown from 5% of jobs in 2002 to 23% in 2016. It also shows the number of low digital jobs substantially declined during the same period.

According to Brookings, pretty much all industries have become more digital.

The good news is those with digital skills tend to be paid pretty well. The mean annual wage for those with a high level of digital skills is an impressive $73,000. Those in low digital skills jobs earn an average of just $30,000.

There's little doubt that the digitalization of the economy is going to continue. This will impact almost all jobs and pretty much all small businesses.

We'll have more on this topic, including how small business owners view automation and automation tools, in the near future.

November 28, 2017

The National League of Cities recently released Discover Your City's Maker Economy, a report that "provides a roadmap for cities to develop policies, programs and a culture that better supports local maker businesses."

The thrust of the report is that "maker-entrepreneurs" - individuals or micro-businesses who create (either by design or fabrication) and sell tangible products - are potentially the future of manufacturing.

The report also suggests the maker movement can drive employment opportunities and provide more inclusive access to entrepreneurship.

New York, not surprisingly, has the largest total number of non-employer businesses.

Non-employer statistics are often used as a proxy for self-employment.

This is because a "non-employer businesses" is defined by the U.S. Census Bureau as "one that has no paid employees, has annual business receipts of $1,000 or more ($1 or more in the construction industries), and is subject to federal income taxes."

In other words, non-employers only have an owner. The data comes from IRS tax files and includes full and part-time businesses. About about three-quarters of all U.S. businesses are non-employers.

For a variety of reasons too wonky to go into here, the non-employer stats are an imperfect self-employment proxy (see the U.S. Census non-employer methodology description for more detail). But we consider this data to be a directionally correct measure of self-employment, both in terms of growth and overall size.

You may ask how non-employer data differs from BLS self-employment data.

The quick answer is the non-employer data comes from IRS data, while self-employment data comes from the BLS's monthly current population survey. This means the two data sets aren't really comparable. See this article for more details.

We started tracking the non-employer data back in 2006. It was the dataset that first alerted us to the growth of the gig economy.

November 21, 2017

It has some very interesting data on small businesses and their use of gig workers.

According to the report:

Business owners reported a 37% increase in hiring gig workers over the past six months, compared to increases of 13% for full-time employees, 22% for part-time employees, and 12% for part-time independent contractors.

19.8% of businesses surveyed reported replacing employees (of any type) with contractors over the past six months.

47% of non-employer/solopreneur firms reported hiring part-time workers and/or contractors to help run the business, for an average of 3.2 workers, including the owner.

The top reasons small businesses are hiring contractors and gig workers is shown in the SCORE chart below.

Most people we talk to think cost is the main reason people use gig workers.

But as the chart clearly shows, cost issues are well below accessing specialized talent and the small business only having temporary needs.

Field service is another industry with lots of on-demand gig workers. Platforms like Field Nation, Work Market, OnForce (recently acquired by Work Market) and others claim to collectively have over 600,000 independent field service technicians working via their sites.

November 14, 2017

Intuit recently announced QuickBooks Capital, a new small business lending product that provides users of QuickBooks access to small business loans up to about $35,000.

This new service's lending process is done algorithmically and from within QuickBooks itself. Thanks to big data and machine learning techniques, most borrowers will know whether or not they are approved for a loan in just a a few minutes.

Lack of credit is consistently one of the top challenges for small businesses. And for new businesses (those that have been in business less than 5 years), the challenges are even greater.

According to the Federal Reserve of New York 2016 Credit Survey: Report on Startup Firms, 70% of young businesses say they need funding to grow. But only 23% of these firms are successful at getting all the funding they are looking for.

The main reason these firms struggle is insufficient credit history.

Simply put, they haven't been around long enough to establish a strong enough track record for lenders to be comfortable providing them credit.

And even if they get the credit they're looking for, small business satisfaction with the lending process is not good

Only 48% of successful borrowers report being satisfied with their experience with small banks, 31% with big banks and 23% with online lenders.

Intuit hopes to improve on all these metrics.

The QuickBooks Connect credit model is, not surprisingly, based on QuickBooks Online data.

Intuit has over 2 million small businesses that have agreed to allow Intuit to use their anonymized QuickBooks data in an aggregated format to develop products like QuickBooks Capital.

This add ups to over 28 billion data points Intuit can use in its credit model.

(An important side point is under Intuit's user agreement, QuickBooks users own their data and have to expressly provide Intuit permission to use their data in this manner).

This database of income statement, balance sheet, cash flow and transactions data allows Intuit to fully analyze the current financial state of a small business and predict its ability to pay back a loan.

It also means Intuit's credit model has enough data to allow them to lend to young small businesses - even those that have been around less than one year.

Based on the service's beta customers, this approach is broadening credit availability and making it easier and quicker to get a loan.

According to an analysis by Intuit of its early borrowers:

46 percent of QuickBooks Capital customers had never applied for a loan before.

60 percent of QuickBooks Capital customers would likely not get a loan elsewhere.

90 percent of QuickBooks Capital customers say the loan helped their business grow.

Almost all borrowers reported being satisfied with the process.

Everyone likes to point out that small businesses are "the engine that drives America's economy".

While this is a bit of an overstatement, it is true they are important drivers of our economy.

Making capital more available and easier to access - especially for young small businesses - will clearly increase economic growth.

QuickBooks Capital is also a good example of how small businesses are going to take advantage of big data, AI and machine learning.

In most cases, small businesses will leverage 3rd party products and services to utilize these advanced techniques.

November 13, 2017

Senate Republicans are turning to the gig economy for new revenue to offset their proposed tax cuts.

They are including a safe harbor provision for gig workers in their tax bill proposal (for those who are so inclined, see the section starting on page 151 of the document).

This provision would provide a relatively simple 3-part test which, if satisfied, would legally classify a gig worker as an independent contractor (the safe harbor).

Since it’s just a proposal for now, we won’t go into details on the tests.

But based on our reading of the bill, most gig platform companies would easily be able to take advantage of the safe harbor.

The reason this provision is in a tax bill is the legislation would also require gig economy platforms and other employers of gig workers to withhold income taxes on the payments they provide gig workers.

But this change would greatly reduce the legal uncertainty and risk around worker classification that exists today.

It would also give gig economy companies a legal way to provide other benefits to gig workers.

Since these workers would be safe harbored, gig economy companies could provide things like training, sick leave and even health insurance without the current legal risk of being charged with misclassification.

We expect a lot of push back on this provision from labor groups and others opposed to the gig economy.

But our overall view is this is would be a positive step for the gig economy and those who work in it. It opens the door for portable benefits and provides incentives for gig economy companies to provide them.

November 09, 2017

The article is written by Kalin Anev Janse, secretary general of the European Stability Mechanism (the eurozone’s lender of last resort). In it, Janse describes 5 broad forces shaping the world's economies and economic order. The 5 are:

Growing Income Inequality

Technology Driving Change in Jobs

Rising Protectionism

Increasing Migration

Growing Influence of Social Media and the Post-truth World

All of these are well known to anyone following economic, social and technology trends.

But this article focuses on the potential of these trends to create global strife. That's not a topic that's well known or well covered.

On a more mundane level - and closer to the topic of this site - the article nicely describes of the changing nature of work.

Key quote on how millennials and today's teenagers view the job market:

"They feel that they are receiving conflicting messages from employers and career advisors: On the one hand, they are told that robots are bound to replace future jobs; on the other, they need technical skills to compete in the job market.

Caught in this conundrum, they are trying to create new types of jobs, rather than going for traditional ones such as banking, finance, or accounting. They dream of becoming YouTube stars, famous videogame vloggers, or Instagram travel bloggers who are paid by sponsors to visit hotels and restaurants around the world and generate sufficient number of likes.

What's interesting about this is as recently as 5 years ago, it's unlikely a senior government official in Europe or the U.S. would have included the changing nature of work in an article like this. At that time, few government officials gave much thought to this.

Now they do. So progress is being made.

The article provides excellent descriptions of all 5 forces, including interesting charts and data on each.

Our favorite chart (click to enlarge) is below. It shows how global protectionism is growing.

It reports that 55% of cities have a good or very good relationship with sharing economy companies like Airbnb and Uber (see chart below; click to enlarge) and that 4 out of 5 cities support the growth of the sharing economy.

It also found that 16% of cities currently partner with sharing economy companies and 79% of those who don't would be open to partnering.

These are very positive numbers and show a large majority of U.S. cities favor the sharing economy.

As the report chart below shows, over 40% of U.S. cities surveyed already are using drones.

The report's conclusion is:

Cities are incubators for new technology. Overall, the nation’s city officials are embracing new technologies and sharing economy platforms, and these leaders recognize the value that these new services bring to their cities and residents.

So despite the negative headlines, the sharing economy continues to expand and add value.

This is not to say cities don't have issues or concerns with the sharing economy. The report makes it clear they do, with public safety issues being the area of most concern.